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The UK and Viet Nam signed a trade continuity agreement on 11 December 2020. The signed Free Trade Agreement (FTA) will lock the benefits of the existing UK-Viet Nam trading relationship (as contained in the EU-Viet Nam FTA, which ceases to apply
at the end of the Brexit transition period), worth £5.2bn. The FTA is a key step towards the UK joining the Trans-Pacific Partnership, the prospect of which Viet Nam has ‘welcomed’.
Source: Joint statement by the UK and Viet Nam.
The European Securities and Markets Authority (ESMA) published a reminder for its users, confirming that scheduled IT operations will take place on its databases and systems at the end of the Brexit transition period, during a maintenance window starting
on 9.30pm CET on 31 December 2020.
Source: ESMA reminds users of scheduled IT operations at the end of the Brexit transition period.
ESMA announced that Euroclear UK & Ireland Limited (EUI), the central securities depository (CSD) established in the UK, will be recognised as a third-country CSD (TC-CSD) after the end of the transition period on 31 December 2020. On 25 November
2020 the European Commission adopted an equivalence decision determining, for a limited time period, that the regulatory and supervisory framework applicable to CSDs established in the UK is equivalent in accordance with the Central Securities
Depositories Regulation (EU) 909/2014 (CSDR).
Source: ESMA to recognise Euroclear UK & Ireland Limited (EUI) after Brexit transition period.
The Financial Conduct Authority (FCA) added new guidance regarding financial protection and dispute resolution to its webpages ‘How Brexit could affect you’ (which is aimed at consumers) and ‘Brexit: information for retail investment
firms in the UK’. The new guidance explains how the Financial Ombudsman Service (FOS) and the Financial Compensation Scheme (FSCS) will apply both during the Brexit transition period and after it ends on 31 December 2020.
Sources: How Brexit could affect you and Brexit: information for retail investments firms in the UK.
The FCA published FAQs on Brexit and the temporary permissions regime (TPR), which give FCA-regulated firms additional information about Brexit and aim to help them prepare for the end of the transition period. The webpage reminds firms that they
should make sure that they are ready for this and have plans in place to minimise disruption for customers.
Source: FCA: Brexit: frequently asked questions.
The economic secretary to the Treasury, John Glen, wrote to Pat McFadden MP on points arising from the committee session on the Financial Services Bill on 24 November 2020 in relation to credit rating agencies, risk weightings and leverage ratios.
Source: Letter from John Glen MP to Pat McFadden MP regarding issues raised during the Committee Stage (sixth day): credit rating agencies, risk weightings, leverage ratios.
SI 2020/1468: This enactment is made in exercise of legislative powers under the Sanctions and Anti-Money Laundering Act 2018 in preparation for IP completion day. This enactment revokes three pieces of UK secondary legislation and three
pieces of retained direct EU legislation in relation to sanctions to establish a sanctions regime for the purpose of deterring and providing accountability for the misappropriation of State funds from a country outside the UK. It comes into force
in accordance with regulations made under section 56 of the Sanctions and Anti-Money Laundering Act 2018.
Read the official version of this legislation and the explanatory memorandum.
SI 2020/1514: Certain provisions of certain regulations, which were made under Part 1 of the Sanctions and Anti-Money Laundering Act 2018, came into force on 14 December 2020, some will come into force on IP completion day and some immediately
after IP completion day.
Read the official version of this legislation.
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For further information on the effects of COVID-19 on financial services, see: Coronavirus (COVID-19)—key developments for financial services lawyers and
Coronavirus (COVID-19)—key financial services issues.
The European Central Bank (ECB) and the European Banking Authority (EBA) are both calling on banks to apply a conservative approach to dividends and other distributions in light of the coronavirus (COVID-19) pandemic. The EBA is urging banks not to
distribute capital outside the banking system through dividends and other distribution policies unless extreme caution is applied. The ECB has issued a revised recommendation in which it states that banks should refrain from or limit dividends
and share buybacks until 30 September 2021.
Sources: The EBA continues to call on banks to apply a conservative approach on dividends and other distributions in light of the COVID-19 pandemic,
ECB asks banks to refrain from or limit dividends until September 2021, RECOMMENDATION OF THE EUROPEAN CENTRAL BANK of 15 December 2020 on dividend distributions during the COVID-19 pandemic and repealing Recommendation ECB/2020/35 (ECB/2020/62) and
ECB letter to banks: Remuneration policies in the context of the coronavirus (COVID-19) pandemic.
The Bank for International Settlements (BIS) published a speech by its general manager, Agustín Carstens, on the challenges and priorities for supervisors in light of the coronavirus (COVID-19) pandemic. Carstens discussed the global response
by regulators and firms to the financial elements of the COVID-19 crisis, as well as other challenges facing the sector including the sustainability of banks' business models, the intensified use of new technology in financial services and the
impact of climate risk on financial stability.
Source: A delicate moment for supervisors: challenges and priorities in a global pandemic.
The UK Parliament’s Public Accounts Committee published a report noting that UK taxpayers face covering billions of pounds in the Bounce Back Loan Scheme (BBLS), with potential losses estimated in the region of £15bn to £26bn. The
government estimates the majority of this will be credit losses, where the borrower wants to repay the loan but cannot, but it lacks the data to assess the levels of fraud within the scheme, or its actual economic benefits.
Source: Risk of UK taxpayer bailout on up to £26 billion of Covid Bounce Back Loans.
The European Commission adopted a delegated regulation proposing to amend the minimum thresholds for weekly position reporting by trading venues pursuant to Commission Delegated Regulation (EU) 2017/565, which specifies the minimum thresholds
for purposes of Article 58(1) of the recast Markets in Financial Instruments Directive (MiFID II).
Source: Commission Delegated Regulation (EU) …/... amending Commission Delegated Regulation (EU) 2017/565 as regards the thresholds for weekly position reporting.
The FCA published a new version of its supervisory statement setting out its approach to the operation of the MiFID transparency regime after the end of the EU withdrawal transition period. It replaces the statements the FCA issued in March and October
2019. The FCA has also published an updated version of its Financial Instruments Transparency System (FITRS) instructions.
Sources: Statement on the Operation of the MiFID Markets Regime and FCA Financial Instruments Transparency System (FITRS) instructions.
ESMA announced that it is looking for new candidates for the Consultative Working Group (CWG) of the Financial Innovation Standing Committee (FISC).
Source: ESMA is seeking experts in financial innovation for its consultative group.
The Council of the EU published its Presidency final draft compromise text concerning the proposal for a regulation establishing the InvestEU Programme. The text highlights the Council’s proposed amendments to the version of the regulation
proposed by the European Commission.
Source: Proposal for a Regulation of the European Parliament and of the Council establishing the InvestEU Programme - Presidency final draft compromise text.
The FCA published Handbook Notice No 83, which includes changes to the Handbook and binding technical standards (BTS) made by the FCA board on 7 and 10 December 2020. Handbook Notice No 83 also provides information on the Temporary Transitional
Power (TTP). Feedback on the relevant consultation papers (CPs) is set out in Chapter 3 of the Handbook Notice or in separate feedback statements.
Source: Handbook Notice No 83.
The FCA published the December 2020 issue of its Regulation Round-up. This edition includes a reminder for firms to check that they have registered for RegData (the FCA’s new data collection platform) ahead of their move over from Gabriel.
It also provides an overview of firms’ obligations in relation to Certification Regime and Conduct Rules training under the SM&CR.
Source: Regulation round-up December 2020.
HM Treasury published a Call for Evidence seeking comments on the UK’s framework for cross border financial services. The Call for Evidence is running until 11 March 2021 in order to help the government understand how the UK’s current
overseas framework supports its position as a global financial centre. The government wants to ensure its legislation achieves the goal of attracting activity to the UK whilst supporting financial stability.
Source: Policy paper - Call for Evidence on the Overseas Framework.
The FCA appointed Sheldon Mills as its new executive director, consumers and competition, and Siobhán Sheridan as its chief people officer.
Source: New executive appointments at Financial Conduct Authority.
The International Swaps and Derivatives Association (ISDA) announced that, due to the coronavirus (COVID-19) pandemic, its 2021 annual general meeting (AGM) will be entirely virtual. The AGM will take place from 11 May 2021–13 May 2021 and
will deliver 'must-have intelligence' on key derivatives issues.
Register for the event here.
European Council Decision (EU) 2020/2049 of 10 December 2020 appointing a member of the Executive Board of the European Central Bank has been published in Official Journal.
Source: European Council Decision (EU) 2020/2049 of 10 December 2020 appointing a member of the Executive Board of the European Central Bank
The Prudential Regulation Authority (PRA) published its report ‘Evaluation of the Senior Managers and Certification Regime’ (SM&CR), along with the results of its 2020 SM&CR Firm Survey. The report reviews the operation of
the SM&CR against its original objectives, examines whether the SM&CR has resulted in unintended consequences, assesses progress and considers whether any further action is necessary. The PRA concludes that the SM&CR has had a
broadly positive start, however, there are some areas, such as the use of conduct notifications and regulatory references, where it is not yet clear whether the regime is working fully as intended. To progress this, the evaluation identifies
nine follow-up actions and recommendations to help refine the way in which the regime operates in practice. Although this is not a formal consultation, the PRA welcomes feedback from stakeholders on the issues raised in the report by 26 February
Sources: Evaluation of the Senior Managers and Certification Regime (SM&CR) and
FCA webpage update: Senior Managers and Certification Regime.
For further information, see: SM&CR—one minute guide.
The Basel Committee on Banking Supervision (BCBS) published a report presenting the results of its latest Basel III monitoring exercise, based on data as of 31 December 2019. The report sets out the impact of the Basel III framework that was initially
agreed in 2010 as well as the effects of the Committee's December 2017 finalisation of the Basel III reforms and the finalisation of the market risk framework published in January 2019.
Source: Basel III Monitoring Report.
The European Commission adopted a Delegated Regulation supplementing Regulation (EU) 575/2013 (CRR) with regard to regulatory technical standards (RTS) for assigning risk weights to specialised lending exposures (C(2020) 8242 final).
Sources: COMMISSION DELEGATED REGULATION (EU) …/... supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for assigning risk weights to specialised lending exposures and
COMMISSION DELEGATED REGULATION (EU) …/... supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for assigning risk weights to specialised lending exposures
For further information, see: CRD IV—essentials.
The EBA issued an opinion on the amendments proposed by the European Commission to the EBA’s final draft regulatory technical standards (RTS) specifying the assessment methodology competent authorities must follow when assessing credit institutions’
and investment firms’ compliance with the requirements to use the internal ratings based (IRB) approach laid down in the CRR. The EBA’s draft RTS were submitted to the Commission in July 2016.
Source: EBA issues Opinion to the European Commission on the proposed amendments to the EBA final draft RTS on IRB assessment methodology.
The PRA published a new version of its Direction for modification by consent (MBC) of 5.1 to 5.3 and 5.5 of the Capital Buffers Part of the PRA Rulebook. The MBC was published alongside policy statement PS26/20, CRD V. The PRA also published updated
Leverage Voluntary Requirements (VREQ) applications for global systematically important institutions (G-SIIs) and institutions subject to a systemic risk buffer.
Sources: Capital Requirements Directive V (CRD V): Further implementation,
Modification by consent: PRA Rulebook Capital Buffers and
Additional Leverage Ratio Buffer Model Requirements.
The EBA published a report on the impact of implementing the final Basel III reforms in the EU. The full Basel III implementation, in 2028, would result in an average increase of 15.4% on the current Tier 1 minimum required capital of EU banks.
The results do not reflect the economic impact of the coronavirus COVID-19 pandemic on participating banks as the reference date of this impact assessment is December 2019.
Source: EBA updates impact of the Basel III reforms on EU banks’ capital.
The EBA published its updated ad-hoc impact study on the implementation of Basel III in the EU, in response to the European Commission’s call for advice (CfA) on the subject. The EBA found that, under the full implementation of Basel III
and conservative assumptions, the updated impact is meaningfully lower than previously estimated, using June 2018 data and a consistent sample.
Source: EBA updates its Basel III impact study following the EU Commission’s call for advice.
The EBA issued a revised list of validation rules for its implementing technical standards (ITS) on supervisory reporting, highlighting those which have been deactivated either for incorrectness or for triggering IT problems. Competent authorities
throughout the EU are informed that data submitted in accordance with these ITS should not be formally validated against the set of deactivated rules.
Source: EBA issues revised list of ITS validation rules.
The EBA published a package of seven draft regulatory technical standards (RTS) in relation to the new prudential regime for investment firms introduced by the Investment Firms Regulation (IFR) and Directive (IFD). The final draft RTS are intended
to ensure a proportionate implementation of the new prudential framework for investment firms, taking account of the different activities, sizes and complexity of investment firms.
Source: EBA publish final draft technical standards on the prudential treatment of investment firms.
For further information, see: Review of the prudential framework for investment firms.
The FCA published consultation paper CP20/24: A new UK prudential regime for MiFID investment firms which seeks views on the regulator’s proposed rules to introduce the UK Investment Firm Prudential Regime (IFPR) for FCA prudentially-regulated
investment firms (FCA investment firms). The draft rules will apply to any MIFID investment firm that are currently subject to any part of the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR). Feedback is
sought by 5 February 2021.
Sources: FCA publishes first consultation on new prudential regime for UK investment firms and
CP20/24: A new UK prudential regime for MiFID investment firms.
The PRA issued a statement on capital distributions by large UK banks. Following an assessment carried out in Q4 2020, the PRA has announced that an extension of the exceptional and precautionary action taken in March 2020 to suspend dividends
and buybacks on ordinary shares is not necessary. It concludes that there is scope for banks to recommence some distributions should their boards choose to do so, within an appropriately prudent framework.
Source: PRA statement on capital distributions by large UK banks.
The Financial Stability Board (FSB) published the Global Monitoring Report on Non-Bank Financial Intermediation 2020, which present global trends and risks in non-bank financial intermediation (NBFI). The report, which covers data from 29 jurisdictions
representing over 80% of global GDP, focuses on the parts of NBFI that may pose bank-like financial stability risks and/or involve regulatory arbitrage.
Source: FSB reports on global trends and risks in non-bank financial intermediation.
The FSB published a note which responds to questions posed by external stakeholders on the questionnaire for gathering information about continuity of access to financial market infrastructures (FMIs) for firms in resolution.
Source: FSB: Continuity of access to FMIs for firms in resolution: Informal summary of outreach and Q&A.
The Bank of England (BoE) published the Financial Stability Report and Financial Policy Summary and Record for December 2020. The Financial Policy Summary and Record includes the Financial Policy Committee (FPC)’s views on stability in the
provision of financial services at the end of the transition period with the EU, which is that some market volatility and disruption to financial services, particularly to EU-based clients, could arise.
Sources: Financial Policy Summary and Record—December 2020 and
Financial Stability Report—December 2020.
The Global Legal Entity Identifier Foundation (GLEIF) announced that it has invited stakeholders from across the digital economy to engage in a cross-industry development program to create an ecosystem and credential governance framework, together
with a technical supporting infrastructure, for a digitally verifiable legal entity identifier (LEI), the vLEI.
Source: GLEIF advances digital trust and identity for legal entities globally.
The Single Resolution Board (SRB) announced that it held its 11th Industry Dialogue on 14 December 2020. The Industry Dialogue assembled representatives from the European Central Bank, European Commission, European Parliament, national banking
federations and National Resolution Authorities. Topics discussed include an update on the SRB minimum requirement for own funds and eligible liabilities (MREL) policy, the resolution planning cycle for 2021 and the Single Resolution Fund.
Sources: 11th Industry Dialogue, SRB Industry Dialogue MREL Presentation, 14 December 2020,
SRB Industry Dialogue RPC Presentation, 14 December 2020 and SRB Industry Dialogue SRF Presentation, 14 December.
The SRB published its standardised data set to ensure that the minimum needed data is available to support a robust valuation for bank resolution.
Source: SRB publishes its final Valuation Data Set.
The SRB issued a statement welcoming the Eurogroup’s agreement, announced on 30 November 2020, to introduce the common backstop to the Single Resolution Fund (SRF) early. The SRB says this is an important step towards completing the banking
union and that it will enhance confidence in the bank resolution framework. In the context of the coronavirus (COVID-19) crisis in particular, the SRB says the backstop will strengthen the SRB’s capacity should any issues arise.
Source: The common backstop—a welcome step forward.
The SRB published a report on its 8 October 2020 annual conference, which was called ‘Banking resolution: Firm foundations for stability’. Participants discussed the role of the banks in addressing the economic impact of the coronavirus
(COVID-19) crisis, and the ‘critical missing elements’ of the resolution framework. A European Deposit Insurance Scheme (EDIS), the European Stability Mechanism (ESM) backstop, and the development of a functioning capital markets
union (CMU) were identified as points of urgency.
Source: SRB 2020 conference report.
The EBA published an opinion on the interplay between the EU Anti-Money Laundering Directive (Directive (EU) 2015/849 (EU AMLD)) and the EU Deposit Guarantee Schemes Directive (Directive 2014/49/EU (EU DGSD)). The opinion focuses on the
provision of information to depositors linked to a DGS payout, based on real-life experiences of DGS interventions where there were anti-money laundering and countering the financing of terrorism (AML/CFT) concerns.
Source: Opinion of the European Banking Authority on the interplay between the EU Anti-Money Laundering Directive and the EU Deposit Guarantee Schemes Directive.
For further information, see: The anti-money laundering regime.
The EBA published its first report on the progress made by competent authorities regarding the establishment of colleges to enhance supervisory cooperation for AML/CFT purposes. The report is part of the EBA’s new role in leading, coordinating
and monitoring the fight against AML/TF as established in Regulation (EU) 1093/2010 (the EBA Regulation).
Sources: EBA observes improved cooperation between authorities through newly established AML/CFT colleges and EBA Report on the functioning of AML Colleges.
The FCA announced the establishment of a temporary registration regime to allow existing cryptoasset firms, who have applied to be registered with the FCA, to continue trading. The FCA is advising customers of cryptoasset firms which should have applied
to the FCA, but have not done so, to withdraw their cryptoassets or money before 10 January 2021.
Sources: FCA establishes Temporary Registration Regime for cryptoasset businesses and
Cryptoassets: AML / CTF regime.
The FCA issued a warning to consumers about festive season loan fee fraud, which was the third most reported scam in December 2019, making up 1 in 8 (12%) of all FCA scam reports. Loan fee fraud involves consumers being asked to pay an upfront fee
for a loan or credit that they then never receive.
Source: FCA issues warning over festive season loan fee fraud.
SI 2020/1535: Certain Provisions of the Sanctions and Anti-Money Laundering Act 2018 came into force on 14 December 2020, others will come into force on IP completion day.
The FCA published policy statement PS20/15: High-risk investments: Marketing speculative illiquid securities (including speculative mini-bonds) to retail investors, in which it has confirmed proposals to permanently ban the mass-marketing of speculative
illiquid securities—including speculative mini-bonds—to retail investors.
Source: FCA confirms speculative mini-bond mass-marketing ban.
The Complaints Commissioner published a final report dated 26 November 2020, in which it has declined to uphold a complaint regarding actions taken by the FCA and the PRA in connection with recapitalisation exercises carried out by the Co-operative
Bank in 2013 and 2017. The Commissioner has concluded that the regulators’ actions were not unreasonable.
Source: Final report by the Complaints Commissioner: Complaint number PRA00012 and FCA00652.
The Financial Ombudsman Service (FOS) launched a consultation on its strategic plans and budget for 2021–2022. The consultation sets out the FOS’s plans and budget for the coming financial year, including the expected volumes of complaints
and proposed budget and funding arrangements. It also gives an update on the current financial year. The deadline for responses is 31 January 2021.
Source: Consultation opens on our strategic plans and budget for 2021/2022.
The FCA issued updated complaints data for the first half of 2020, including firm specific data for individual firms and aggregate figures for the industry as a whole. The data show that the number of complaints received by firms dropped by more than
50% compared to the second half of 2019.
Source: Complaints data.
The Information Commissioner’s Office (ICO) Financial Recovery Unit (FRU) initiated retrieval proceedings against the defunct claims management firm, Pownall Marketing Limited (PML). The ICO fined PML £250,000 for making 356,369 nuisance
calls over a six-month period in 2019. In the event that PML continues to not to pay the fine, the ICO FRU will likely petition to wind up the company.
Source: ICO to recover £250,000 fine from Manchester claims management firm.
The FCA fined Barclays Bank UK PLC, Barclays Bank PLC and Clydesdale Financial Services Limited (Barclays) for failures concerning their treatment of consumer credit customers who fell into arrears or faced financial difficulties. The fine totalled
£26m and Barclays has redressed customers, paying around £273m to approximately 1,530,000 customer accounts since 2017.
Source: FCA fines Barclays £26 million over treatment of customers in financial difficulty.
The FCA issued a press release announcing that it has fined independent financial advice firm LJ Financial Planning Ltd (LJFP) £107,200 for providing its customers with unsuitable pension switching and transfer advice and failing to manage its
conflicts of interest.
Source: FCA fines LJ Financial Planning Ltd £107,200.
The FCA fined former portfolio manager, partner and Chief Investment Officer at Fenician Capital Management LLP, Corrado Abbattista, £100,000 for market abuse. Abbattista has also been prohibited from performing any functions relating to regulated
Source: FCA fines and prohibits hedge fund Chief Investment Officer for market abuse.
The European Parliament confirmed that it will raise no objections to the draft Commission regulation amending Regulation (EC) 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) 1606/2002 as
regards International Accounting Standard 39 and International Financial Reporting Standards 4, 7, 9 and 16.
Source: European Parliament Texts Adopted (Provisional edition): Non-objection to an implementing measure: International Accounting Standard 39 and International Financial Reporting Standards 4, 7, 9 and 16.
The chair of ESMA, Steven Maijoor, delivered a speech at the third roundtable on euro risk-free rates, in which he discussed EURIBOR fallback provision, finalising the transition from EONIA to €STR, and ESMA’s outlook as the future supervisor
Source: Steven Maijoor speaks at the third roundtable on euro risk-free rates.
The Global Foreign Exchange Committee (GFXC) met via videoconference to discuss the progress being made in its review of the FX Global Code. The Committee is on track to finalise the review in mid-2021. The Committee also discussed FX benchmarks,
and announced a new co-vice chair.
Source: GFXC meets via videoconference to discuss progress on the FX Global Code review, FX benchmarks, and announces new co-vice chair.
ICE Benchmark Administration Limited (IBA), the FCA-authorised and regulated administrator of LIBOR, has launched its GBP SONIA ICE Swap Rate as a benchmark for use by licensees. The launch of the new benchmark follows a positive market response to
feedback and consultation papers issued by IBA, and the successful publication of GBP SONIA ICE Swap Rate settings on an indicative ‘Beta’ basis since October 2020.
Source: ICE Benchmark Administration launches GBP SONIA ICE Swap Rate as a benchmark for use by licensees.
The Council of the EU endorsed amendments to the EU capital market rules set out in the European Commission’s Capital Markets Recovery Package, which are intended to support the economic recovery from the coronavirus (COVID-19) crisis. The legislative
changes, which include amendments to the second markets in financial instruments directive (MiFID II) , the prospectus regulation and the EU securitisation framework, were provisionally agreed with the European Parliament last week.
Source: Capital Markets Recovery Package: Council confirms targeted amendments to EU capital market rules.
For further information, see: Coronavirus (COVID-19)—EU capital markets recovery package.
The European Commission welcomed the agreement reached by the European Parliament and the Council of the EU on amendments to the Markets in Financial Instruments Directive 2014/65/EU (MiFID II), the Prospectus Regulation (EU) 2017/1129,
the Securitisation Regulation (EU) 2017/2402 and the Capital Requirements Regulation (EU) 575/2013 (CRR). The amendments were proposed in July 2020 in response to the coronavirus (COVID-19) pandemic and the measures are referred
to collectively as the capital markets recovery package.
Source: Agreements on MiFID, securitisation and the EU recovery prospectus.
The European Commission adopted a draft delegated regulation supplementing the EU Prospectus Regulation (Regulation (EU) 2017/1129) concerning the minimum information content of the document to be published for a prospectus exemption in connection
with a takeover by means of an exchange offer, a merger or a division.
Sources: Commission Delegated Regulation (EU) …/… supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council as regards the minimum information content of the document to be published for a prospectus exemption in connection with a takeover by means of an exchange offer, a merger or a division and
For further information, see: The Prospectus Regulation—essentials.
ESMA published its annual market share calculation for EU-registered credit rating agencies (CRAs). The purpose of the market share calculation is to facilitate issuers and related third parties in their evaluation of a CRA with no more than 10% total
market share in the EU.
Source: ESMA reports on annual market share of Credit Rating Agencies.
For further information, see: EU regulatory regime for credit rating agencies.
The European Parliament confirmed that it will not object to the Commission Delegated Regulation of 6 November 2020 amending Delegated Regulation (EU) 2019/815 as regards the 2020 update of the taxonomy laid down in the regulatory technical
standards (RTS) for the European Single Electronic Format (ESEF).
Source: European Parliament Texts Adopted (Provisional edition): Non objection to a delegated act: The 2020 update of the taxonomy laid down in the regulatory technical standards for the single electronic reporting format .
The Fixed Income, Currencies and Commodities Markets Standards Board (FMSB) published transparency drafts of a standard for the execution of large trades in fixed income, currencies and commodities (FICC) markets and a standard for the sharing of
investor allocation information in the fixed income primary markets. The deadline for comments is 16 March 2021, with the final documents expected to be published shortly thereafter.
Sources: FMSB Transparency Draft: Standard for the execution of Large Trades in FICC markets and Standard for the sharing of investor allocation information in the fixed income primary markets.
HM Treasury announced that it intends to lay a statutory instrument under the UK Short Selling Regulation, amending the initial notification threshold under Article 5(2) of the Short Selling Regulation for the reporting of net short positions to the
FCA. The amendment will change the threshold from 0.2% to 0.1%.
Source: HM Treasury: Notifications threshold under the Short Selling Regulation.
The European Parliament approved the Council of the EU’s position at first reading with a view to adoption of the European Commission’s proposed regulation on a framework for the recovery and resolution of central counterparties (CCPs).
The President of the Parliament has been instructed to sign the act with the President of the Council.
Source: European Parliament Texts Adopted (Provisional edition): Framework for the recovery and resolution of central counterparties.
The International Swaps and Derivatives Association (ISDA) published an article by its chief executive officer, Scott O’Malia, on the problems facing EU and UK firms who wish to trade certain liquid derivatives with each other following IP completion
day. O’Malia says that the best way to resolve the issue is to grant equivalence for trading venues, but time is running out.
Source: Action needed on the DTO.
ISDA and Clarus published the November 2020 edition of their risk-free rates (RFR) adoption indicator. This indicator tracks how much global trading activity is conducted in cleared over-the-counter and exchange-traded interest rate derivatives (IRD)
that reference the identified RFRs in six major currencies, and declined to 8.3% in November 2020 compared to 11.6% the prior month. On a traded notional basis, the percentage of RFR-linked IRD accounted for 10.4% of total IRD in November 2020,
down from 13.3% the prior month.
Source: ISDA-Clarus RFR adoption indicator: November 2020.
ISDA, together with seven other trade associations, have sent a letter to the Commissioner for Financial services, financial stability and Capital Markets Union, Mairéad McGuinness, requesting that the European Commission recognise the equivalence
of UK trading venues for the purposes of the derivatives trading obligation (DTO) before the end of the Brexit transition period. The trade associations have proposed that the long-term consequences for use of market infrastructure are uncertain
if the request is not recognised.
Source: Joint Trade Associations Letter Requesting DTO Equivalence.
ESMA published updated guidelines on money market fund (MMF) stress tests under the MMF Regulation. The updates reflect the experience of MMFs during March 2020, particularly in relation to redemption scenarios.
Source: ESMA updates guidelines on stress tests for money market funds.
For further information, see: Money Market Funds Regulation—essentials.
HM Treasury published its response to its initial consultation on the taxation of asset holding companies in alternative fund structures which was published in March 2020.
Source: Taxation of asset holding companies in alternative fund structures (second stage consultation).
The Bank for International Settlements (BIS) published a working paper on dealing with bank distress: insights from a comprehensive database. It studies the effectiveness of policy tools that deal with bank distress (ie central bank lending, asset
purchases, bank liability guarantees, and impaired asset segregation schemes), and presents and draws upon a novel database that tracks the use of such tools in 29 countries between 1980 and 2016.
Source: Dealing with bank distress: Insights from a comprehensive database.
The European Commission announced a new action plan for tackling non-performing loans (NPLs) in the aftermath of the coronavirus (COVID-19) pandemic. Key measures include further developing secondary markets for distressed assets, converging insolvency
frameworks across the EU, supporting the establishment and cooperation of national asset management companies (AMCs) at EU level, and outlining the precautionary tools provided by the EU bank crisis management and State aid frameworks.
Sources: Coronavirus response: Tackling non-performing loans (NPLs) to enable banks to support EU households and businesses,
Action plan: Tackling non-performing loans (NPLs) in the aftermath of the COVID-19 pandemic,
Opening remarks by Commissioner McGuinness at the press conference on the Action Plan for non-performing loans (NPLs),
Questions and Answers: Tackling non-performing loans to enable banks to support EU households and businesses,
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN CENTRAL BANK: Tackling non-performing loans in the aftermath of the COVID-19 pandemic, EBA welcomes European Commission’s action plan to tackle NPLs in the aftermath of the COVID-19 pandemic and AFME: Commission’s revised action plan for NPLs from Covid-19 disappoints.
The EBA published its annual risk assessment of the European banking system, and the 2020 EU-wide transparency exercise, which provides information on 129 banks across 26 EEA/EU countries and for six banks from UK. Despite the coronavirus COVID-19
shock, the EBA finds that banks have maintained solid capital and liquidity ratios and have increased their lending to the real economy, but economic uncertainty persists, profitability is at record low levels, and there are several early signs
for a deterioration in asset quality.
Source: EBA confirms banks’ solid capital and liquidity positions but warns about asset quality prospects and structurally low profitability.
The EBA published its final draft regulatory technical standards (RTS) on the contractual recognition of stay powers. The RTS aim to ensure the effective application of stay powers under the Bank Recovery and Resolution Directive (BRRD).
Source: EBA publishes final technical standards to ensure effective application of stay powers under the BRRD.
The European Court of Auditors published a report by the EU Contact Committee’s Task Force on Banking Union entitled ‘Preparation for resolution of medium-sized and small banks in the euro area’. The report is based on findings of
a parallel audit on banking resolution carried out by the Supreme Audit Institutions (SAIs) of Austria, Estonia, Finland, Germany, the Netherlands, Portugal and Spain in their respective Member States. The task force was co-chaired by the SAIs
of Germany and the Netherlands.
Source: Contact Committee report on the “Preparation for resolution of medium-sized and small banks in the euro area”.
The FCA updated its Recovery and Resolution Directive webpage to include a new section on ‘BRRD II: Implications for FCA-solo regulated 730k firms’.
Source: FCA: Recovery and Resolution Directive (updated 9 December 2020).
The PRA published a ‘Dear CEO’ letter setting out its priorities for supervising UK deposit takers in 2021. The letter, which has been sent to the chief executive officers of PRA-regulated UK deposit takers, explains that these priorities
are being sent to the wide and diverse range of UK deposit takers of all sizes that the PRA supervises and so the list is not exhaustive, but the letter is intended to provide a helpful overview of its priorities for 2021.
Source: UK Deposit Takers Supervision: 2021 Priorities: Letter to Chief Executive Officers of PRA-regulated UK Deposit Takers.
The PRA published a ‘Dear CEO’ letter setting out its priorities for supervising international banks in 2021. The letter, which has been sent to the chief executive officers of PRA-regulated international banks, explains that these priorities
are being sent to the wide and diverse range of international banks that the PRA supervises and so the list is not exhaustive, but the letter is intended to provide a helpful overview of its priorities for 2021.
Source: PRA: International Banks Supervision: 2021 Priorities: Letter to Chief Executive Officers of PRA-regulated International Banks.
The SRB and the European Banking Institute (EBI) announced that the second SRB-RBI conference on bank resolution will take place online on 3 February 2021.
Source: 2nd SRB-EBI conference on bank resolution - 3 Feb. 2021.
The PRA announced a delay to the proposed effective date established in consultation (CP11/20), which was previously 31 December 2020. The consultation sought views on the PRA’s proposed expectations and guidance relating to external auditors’
work on the matching adjustment (MA) under Solvency II (Directive 2009/138/EC). Any finalised approach will no longer be effective for audits of the Solvency and Financial Condition Reports (SFCRs) with a 31 December 2020 reporting date.
Source: Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment.
For further information, see: Solvency II—essentials.
The PRA has published a ‘Dear CEO’ letter setting out its insurance supervision priorities for 2021. The letter, which has been sent to the chief executive officers of PRA-regulated insurance firms, explains that the PRA’s focus
in 2021 will be on financial resilience, credit risk, the operational impact of the coronavirus (COVID-19) pandemic, risks resulting from the end of the Brexit transition period, and climate change.
Source: PRA: Insurance Supervision: 2021 Priorities: Letter to Chief Executive Officers of PRA-regulated Insurance firms.
The European Insurance and Occupational Pensions Authority (EIOPA) published a discussion paper on non-life underwriting and pricing in light of climate change. It highlights challenges associated with current non-life underwriting practices, and
options to ensure the availability and affordability of insurance products, in the context of climate change. Comments on the discussion paper are sought by 26 February 2021.
Source: Ensuring the availability and affordability of insurance in light of climate change: Discussion paper on non-life underwriting and pricing.
EIOPA published its first annual report on administrative sanctions and other measures imposed under the Insurance Distribution Directive (IDD) by national competent authorities (NCAs). The report, based on Article 36(2) of the IDD, provides an overview
of measures imposed following the IDD’s implementation in 2018.
Source: Report on sanctions under the Insurance Distribution Directive.
For further information, see: Insurance Distribution Directive (IDD)—essentials.
EIOPA published a sensitivity analysis of climate-related transition risks in the investment portfolio of European insurers. The report discusses current holdings of corporate bonds and equity that can be linked to relevant climate-policy sectors
including fossil fuel extraction and carbon-intensive industries. Additionally, the report quantifies potential climate-change related transition risks and offers insights into the potential impacts on these investments as economies move away
from fossil-fuel dependent energy production and carbon-intensive production.
Sources: Sensitivity analysis of climate-change related transition risks: EIOPA’s first assessment and Sensitivity analysis of climate-change related transition risks.
EIOPA published updated representative portfolios to be used in calculating the volatility adjustments (VAs) to the relevant risk-free interest rate term structures for Solvency II. EIOPA will begin using the updated portfolios at the end of March
2021, and updated VAs will be published at the beginning of April 2021. The updates are being published three months ahead of introduction in order to give insurers and re-insurers sufficient time to prepare for the change.
Source: EIOPA updates representative portfolios to calculate volatility adjustments to the Solvency II risk-free interest rate term structures for 2021.
EIOPA published an updated version of its technical documentation relating to risk-free interest rate (RFR) term structures used for the calculation of the technical provisions for (re)insurance obligations. The technical documentation has been updated
with the results of the Deep Liquid and Transparent (DLT) assessment and the representative portfolios update for 2021.
Source: EIOPA updates the technical documentation with the results of the Deep Liquid and Transparent (DLT) assessment and the representative portfolios update for 2021.
A European Commission regulation allowing insurers to defer the use of International Financial Reporting Standard (IFRS) 9 ‘Financial Instruments’ from 1 January 2021 until 1 January 2023 has been published in the Official Journal of the
EU. The regulation reflects amendments to IFRS 4 ‘Insurance Contracts’ made by the International Accounting Standards Board (IASB) in June 2020.
Source: Commission Regulation (EU) 2020/2097 of 15 December 2020 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 4
The FCA launched a consultation on draft guidance to assist parties in proving the presence of coronavirus (COVID-19) within a particular area, radius or vicinity. If the policy wording contains wording 'at the premises' the draft guidance will not
assist. It is not expected that the findings of this consultation will be affected by the decision of the Supreme Court, as this aspect of the High Court's decision was not subject to appeal. The consultation closes on 18 January 2021.
Source: FCA launch consultation to assist parties in proving presence of coronavirus in business interruption insurance claims.
The FCA Supreme Court appeal concerning its test case on non-damage business interruption (BI) insurance claims arising out of the coronavirus (COVID-19) lockdown concluded on 19 November 2020. The FCA has announced on its dedicated BI website
that it has been informed that the Supreme Court will not be in a position to hand down the judgment before January 2021.
Source: Timing of the judgment from the Supreme Court.
For further information, see: Coronavirus (COVID-19)—business interruption insurance.
The FCA published a webpage containing information for customers of Inspire Insurance Services Limited following the firm’s insolvency.
Source: Information for customers of Inspire Insurance Services Limited.
The FCA published information for customers of Professional Construction Risks Ltd (PCRL). On 11 December 2020 the FCA imposed various requirements on PCRL, and PCRL was required immediately to cease carrying out regulated business, which includes
arranging insurance contracts.
Source: Update for customers of insurance broker firm Professional Construction Risks Ltd (PCRL).
The Pensions Dashboards Programme (PDP) published a data standards guide, which contains detailed information on the data elements required for initial dashboards. The dashboard should ensure that providers can prepare data for onboarding to pensions
dashboards. The guide includes definitions of processes, high level data elements and a breakdown of each data element. It also includes examples of how the data elements should work.
Sources: Data standards guide and Key data standards published which will underpin pensions dashboards.
The European Payments Council (EPC) published a brief public information paper, ‘Understanding the cash cycle for banknotes: a high-level description of the generic model and some observations’, which was created by its Cash Efficiency
Working Group (CEWG), aiming to provide a high-level description of the cash cycle, as well as some observations on trends and tendencies, drivers for cash usage, and related challenges.
Source: Understanding the cash cycle.
The FCA announced the outcome of a collaborative project with Bristol University and the Payment Systems Regulator (PSR) aimed at a sophisticated mapping of access to cash. The results highlight the current role of free-to-use ATMs in providing access
to cash and the potential increasing role of the Post Office and cashback, as well as pay-to-use ATMs. The analysis, which is published in the Insight section of the FCA website, also explores differences in access to cash between rural and urban
areas, as well as between more and less deprived areas.
Source: Where to withdraw: National mapping of access to cash.
The Lending Standards Board (LSB) published a report on its evaluation of firms’ implementation of the effective warnings provision (SF1(2)) of the Contingent Reimbursement Model (CRM) Code for authorised push payment (APP) scams. The evaluation
took place between August and November 2020 and assessed all nine signatory firms’ implementation of the effective warnings provision of the Code. The LSB has also issued individual reports to each firm containing recommendations and required
Source: Review of Effective Warnings provision of the CRM Code published by the LSB.
The Department for International Trade launched a global partnerships programme, Leading Edge, to help international financial institutions in priority markets access British fintech solutions, beginning with Singapore, Australia and the US. The
programme is designed to help create the right conditions for new partnerships and trade and investment opportunities, supporting global financial and professional services relationships and promoting the adoption of fintech, particularly
of UK-grown solutions in areas such as RegTech, robotic process automation and AI.
Source: New partnership programme to help financial institutions digitise.
The Financial Markets Law Committee wrote to HM Treasury flagging up its publications on legal entity identifiers (LEIs) for an evidence gathering survey run by the public-private LEI Innovation Working Group. The FMLC has published letters and
papers in the past on the usefulness of the widespread adoption of LEIs, and argues that they could contribute significantly to the transparency of cryptoassets.
Source: Response to survey: Legal entity identifiers: 9 December 2020.
The European Commission published an interim study on the development of tools and mechanisms for the integration of environmental, social and governance (ESG) factors into the EU banking prudential framework and into banks’ business strategies
and investment policies.
Source: Interim study on the development of tools and mechanisms for the integration of environmental, social and governance (ESG) factors into the EU banking prudential framework and into banks' business strategies and investment policies.
EIOPA published a discussion paper on non-life underwriting and pricing in light of climate change. It highlights challenges associated with current non-life underwriting practices, and options to ensure the availability and affordability of insurance
products, in the context of climate change. Comments on the discussion paper are sought by 26 February 2021.
EIOPA published a sensitivity analysis of climate-related transition risks in the investment portfolio of European insurers. The report discusses current holdings of corporate bonds and equity that can be linked to relevant climate-policy sectors
including fossil fuel extraction and carbon-intensive industries. Additionally, the report quantifies potential climate-change related transition risks and offers insights into the potential impacts on these investments as economies move away
from fossil-fuel dependent energy production and carbon-intensive production.
The EBA, EIOPA and ESMA—collectively the European Supervisory Authorities (ESAs)—have written a joint letter commenting on the IFRS Foundation’s consultation on sustainability reporting. In conjunction with the publication of
the joint letter, ESMA has also published its own response to the consultation, in which it recommends establishing high-quality international standards while also catering for the needs of jurisdictions that are at different stages in their
Sources: ESMA supports IFRS Foundation’s efforts on international standardisation in sustainability reporting and
ESAs’ joint letter on the IFRS Foundation’s consultation on Sustainability Reporting.
The International Capital Market Association (ICMA)'s Asset Management and Investors Council (AMIC) has published its response to the third European Commission consultation on the EU Ecolabel for financial products.
Source: ICMA AMIC responds to third EC consultation on the EU Ecolabel for financial products.
The Network for Greening the Financial System (NGFS) has published a progress report on the implementation of sustainable and responsible investment (SRI) practices in central banks’ portfolio management and a survey on monetary policy operations
and climate change, with key lessons for further analyses. The NGFS has also announced eight new members, including the US Federal Reserve System and ESMA.
Source: US Federal Reserve joins NGFS and two new publications released.
The Council of the Islamic Financial Services Board (IFSB) announced at its 37th Meeting on 20 December 2020 in Kuala Lumpur, that it has resolved to approve the adoption of two new standards. The two new standards are IFSB-24: Guiding Principles
on Investor Protection in Islamic Capital Markets, and IFSB-25: Disclosures to Promote Transparency and Market Discipline for Takāful/Retakāful Undertakings.
Source: The IFSB Council adopts two new Standards for the Islamic financial services industry.
The IFSB and the International Islamic Liquidity Management Corporation (IILM) signed, for the second time, a memorandum of understanding (MoU) to enhance their cooperation and collaboration to achieve their respective objectives and mandates
in sustaining the stability and resilience of the Islamic financial services industry (IFSI).
Source: The IFSB and IILM Renew MoU to Emphasise on Economic Development in the Islamic Financial Services Industry.
The Council of the IFSB announced at its 37th Meeting on 20 December 2020 in Kuala Lumpur, that it has resolved to admit two organisations into its membership and to appoint its new chairman.
Sources: The IFSB admits two organisations into its membership and Central Bank of UAE to helm IFSB chairmanship for 2021.
TheCityUK published its 2020 annual report on the UK as an international financial centre. According to the report, the UK’s trade surplus in financial and related professional services was £79.7bn in 2019. For financial services specifically,
the trade surplus in 2019 stood at £60.3bn, nearly as much as the next two leading net exporters, the US and Switzerland, combined. The report also looks at specialist areas of financial services such as green finance, Islamic finance and maritime
financial services, sectors where the UK has been at the forefront of innovation and development.
Source: Huge trade surplus underlines UK global competitiveness in finance.
18 December 2020
Regulation of capital markets
The European Securities and Markets Authority (ESMA) renewed its decision to temporarily require the holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority (NCA) if the position exceeds
0.1% of the issued share capital. This temporary notification measure applies from 18 September 2020 for a period of three months. It applies to any natural or legal person, irrespective of their country of residence. However, it does
not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making or stabilisation activities.
Regulation of personal pension and stakeholder products
The feedback period for the European Commission’s draft Delegated Regulations supplementing Regulation (EU) 2019/1238 on a pan-European Personal Pension Product (PEPP) (the PEPP Regulation) closes on 18 December 2020.
21 December 2020
Markets and trading
The deferred date of application of the clearing obligation for intragroup transactions with a third-country group entity set out in Article 3(2) of Commission Delegated Regulation (EU) 2015/2205 (regarding interest rate derivative
classes) is 21 December 2020, as modified by Article 1 of Commission Delegated Regulation (EU) 2019/667.
The deferred date of application of the clearing obligation for intragroup transactions with a third-country group entity set out in Article 3(2) of Commission Delegated Regulation (EU) 2016/592 (regarding credit derivative classes)
is 21 December 2020, as modified by Article 2 of Commission Delegated Regulation (EU) 2019/667.
The deferred date of application of the clearing obligation for intragroup transactions with a third-country group entity set out in Article 3(2) of Commission Delegated Regulation (EU) 2016/1178 (regarding interest rate derivative
classes) is 21 December 2020, as modified by Article 3 of Commission Delegated Regulation (EU) 2019/667.
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